The past 90 days in Canada have resulted in more than $50 billion worth of deal announcements, which is 81% higher than 2010’s first quarter and in line with the Q1 2007 high.
PwC's Canadian deals leader Kristian Knibutat said, “It has been a very active quarter and we've seen more diversity in deal making.
“For the first time since the credit crisis, the top 20 deals of the quarter showcased a variety of different industries. But our view is that the overall [mergers and acquisitions] environment in 2011 is dramatically different than 2007.”
The PwC report suggests that 2011 will be promising, but also points out some key differences between today's post-crisis Canadian M&A market and the pre-crisis boom:
- A new kind of resource market. Canada's deal markets remain the most concentrated on commodities at 49%. Within commodities, however, emerging sub-sectors such as agriculture, alternative energy, junior mining, shale gas and unconventional extraction look to be the most promising deal opportunities.
- The return of leverage (but not leveraged deals). There was a record quarterly volume of new-issue leveraged loans in Q1, higher even than Q2 of 2007. However, most new issues were in support of repricing and recapitalization, not leveraged buyouts.
- Private equity re-invented. Financial buyers continue to take a back seat to corporate buyers. Private equity firms were involved in only 20% of Canadian deals, down from 29% in the fourth quarter of 2010 and 23% from the third quarter of 2010. No Canadian private equity deal breached the $1 billion mark.
- China a new key player. China is pursuing M&A to gain technology and know-how to leverage within China.
Knibutat noted that “China's five-year plan and its new 'emerging industry list' is a positive from a Canadian perspective. We see key opportunities in sectors such as clean energy, health care, consulting services, finance and bio/nano technologies. Overall, there will be some good opportunities for Canadian businesses that are able to align their strategies with Beijing's larger policy goals.